Cayman Islands: Why The Cayman Islands Have Staying Power

The positive contribution of offshore financial centres sometime gets lost in the debate about regulation and transparency, but it is important to recall why centres like the Cayman Islands exist in the first place, suggests Paul Byles, Director at Caledonian Global Financial Services

The only thing more prominent than the proliferation of global tax and regulatory initiatives is the question regarding the future sustainability of offshore financial services centres.

At first glance it seems a reasonable question: after mounting pressure from the OECD and major overhauls of their regulatory and cross border cooperation frameworks, coupled with numerous regulatory reviews (and the occasional blacklist), it should come as no surprise that these financial services centres might buckle under the pressure.

This potential buckling comes in one of two forms: either clients of jurisdictions such as the Cayman Islands will become frustrated with the increasingly and disproportionately burdensome requirements simply to do business, or the jurisdictions themselves will eventually find that the cost of supporting these new regulatory frameworks is just too high to remain globally competitive in the financial services arena.

The experience of the Cayman Islands demonstrates that the reality is very different, which gives much cause for optimism for the world of offshore financial services. Whether it's adding value to the wealth management objectives of high-net-worth families or creating corporate efficiencies for multinationals, the Cayman Islands continues to lead the way. This experience has been persistent despite the millions spent enhancing regulatory frameworks and accommodating the umpteenth international review of its legal and regulatory infrastructure.

Yet the story of the Cayman Islands' experience is not simply one of persistence; rather, the success lies in the actual contribution that the jurisdiction adds to the world economy. Let's look at the value added a bit more closely.

Local benefits

The Cayman Islands is one of the top 10 international financial centres in the world, with over 40 of the top 50 major international banks holding licences there. Over 80 percent of more than $1trn in deposits booked through the Cayman Islands represents inter-bank bookings between onshore banks and their Cayman Islands branches or subsidiaries. The offshore bank product continues to thrive and evolve due to worldwide recognition of the quality of Cayman's industry, as well as the intrinsic benefits of the absence of capital gains tax, taxes on bank transfers and no exchange controls. These banking groups can also utilise their Cayman-based branches or subsidiaries to issue international debt as it is easier and more economical for banks to issue bonds, CDs, TDs, etc. which are then sold to investors.

It is also important to remember that the aforementioned benefits can have a direct positive influence on consumers based onshore, because the capital raised may be utilised to decrease the cost of funding to these banks, thereby enabling lower interest to be charged to its onshore customers.

Private banking, too, has its traditional benefits, insofar as wealth management can be handled by offshore experts to improve succession planning while preserving or maximising capital for high-net-worth individuals. While the issue of legitimate financial privacy is not normally at the forefront of the current debates on transparency, most stakeholders including government officials, banks and of course the clients themselves still recognise that privacy has a key role to play. Moreover, this privacy value can co-exist alongside the various due diligence and transparency requirements for the vast majority of clients who are carrying out business legally.

Captive insurance

The Cayman Islands is the leading jurisdiction for healthcare captives, representing 34 percent of all captives, and to date approximately 90 percent of this is focused largely within the North American market. Cayman's insurance industry has been resilient in a very challenging market environment. To put this in perspective, in 2012 Cayman received the highest number of captives licences since the brutal downturn of the 2004 market. Today, the Cayman captive sector continues to show positive growth, with premiums at $11.83bn and total assets at $88bn, compared to $11.80bn and $69.2bn (a 27 percent increase) last year.

Fundamentally, captive insurance companies afford, for example, hospital networks in the United States the option of setting up their own captive insurance company in the Cayman Islands. One of the benefits of using the Cayman captive structure is that it offers flexibility to the client. This helps to address certain difficulties onshore clients may endure when attempting to secure insurance coverage via commercial insurance companies or when they simply cannot access intended coverage in a cost effective manner.

For years now, the Cayman captive product has been the facility through which many US-based medical groups have gained access to insurance coverage at reasonable rates. The cost savings benefit to related hospitals can be passed on to patients, and in some cases those hospitals may even gain new types of coverage which they may not have otherwise had access to.

Hedge funds

The international markets know very well that Cayman is the global leading hedge funds domicile. What is less known is how these funds use the Cayman Islands by adding value within onshore economies. The Cayman Islands has, in fact, facilitated hundreds of billions of dollars of investment into OECD economies such as the US using offshore hedge funds. Cayman funds provide a tax-neutral platform for international investors, enabling them to participate from several countries under a mutual investment purpose.

In many cases, the funds invested support projects based in economies such as the US. It is, therefore, somewhat ironic that the debate on the impact of offshore financial centres focuses on the issue of capital outflows when in actuality this capital, which often originates outside the US, ends up onshore benefiting the US and other OECD based economies via increased employment opportunities resulting from those investments.

So whether it's the role of its banking, insurance, trusts, or investments services, the Cayman Islands continues to offer positive value to the global economy. And this seems set to continue for the foreseeable future. Clients and other users of the services offered in the Cayman Islands can rest assured that this jurisdiction will likely remain a major player in the offshore financial service arena, precisely because it continues to uphold a high calibre of international expertise, continues to add value, in spite of regulatory developments.

While no one can predict the future of the offshore world, it is fair to surmise that the Cayman Islands have effectively demonstrated their staying power as one of the leading financial services centres. That the jurisdiction is able to continue to deliver these services to its clients and service providers alike in the context of the various global developments over the past decade or so is, in itself, a remarkable success story, and one that is rarely told.

Originally published in World Finance

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Cayman Finance
Cayman Finance
Cayman Finance
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Cayman Finance
Cayman Finance
Cayman Finance
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions